The United States Court of Appeals for the seventh circuit has upheld a lower district courts ruling against PEP.

Here are some excerpts from the decision

"Here, the good that Slep-Tone alleges the defendants are improperly passing off as a Slep-Tone product is the unauthorized digital copy of the Sound Choice karaoke track (duplicated from the original CD+G compact disc or MP3+G media supplied by Slep-Tone) made (or obtained from others) by the defendants. We shall assume, perhaps counter-intuitively, that a digital file counts as a tangible good for purposes of the trademark analysis. See Slep-Tone Entm’t Corp. v. Sellis Enters., Inc., 87 F. Supp. 3d 897, 905 n.4 (N.D. Ill. 2015) (citing Cvent, Inc. v. Eventbrite, Inc., 739 F. Supp. 2d 927, 936 (E.D. Va. 2010), and 37 C.F.R. § 6.1(9)). Any number of communicative products—books, music, movies, computer software—are now bought and sold in digital form, many of them exclusively so.

But the question for our purposes is what, if any, tangible “good” the consumer sees, and whether the use of the plaintiffs’ trademark leads to confusion about the source of that particular good.

Recall that the defendants are not alleged to be in the business of selling copies of karaoke tracks, as they might be if their customers were other karaoke operators looking to assemble their own libraries of karaoke tracks, for example. The defendants instead are alleged to play the unauthorized copies for their bar patrons to encourage alcohol and food sales. So what the pub patrons see is the performance of the creative work contained on the copies: they hear the musical accompaniment and they see the corresponding lyrics and graphics.

It is not alleged, nor does the briefing suggest, that the patrons see the physical good in question—the digital file that presumably resides on the hard drive of the bar’s karaoke system. Even if a patron might be aware that there is such a file, she does not see that file or the medium on which it resides, as she might if she were purchasing a karaoke track on a compact disc from a dealer or as a download from an internet website, for example.

The patron sees only the performance of the creative content of the digital file. So far as the patron is concerned, the content could be played from a compact disc, the pub’s karaoke hard drive, or from an internet streaming source. Whatever the source, the consumer sees and hears the same content and her perception of that content will be essentially the same.

It is true that the pub patron will see the Sound Choice mark and trade dress whenever the graphical component of the karaoke tracks is displayed. This, according to the plaintiffs, is what gives rise to confusion as to the source of the good containing those tracks: Patrons may assume it is a genuine, authorized Slep-Tone product when in fact it is a bootleg copy.

But about what exactly is the patron confused? On seeing the Sound Choice mark, a patron may believe that she is seeing and hearing content that was created by Slep-Tone. And she is."

And

"But the problem for Slep-Tone, apart from the fact that it does not affirmatively allege that the defendants’ copies are noticeably inferior to their patrons, see n.3, supra, is that the defendants are not passing off a tangible good sold in the marketplace as a SlepTone good. As we have discussed, the defendants are not selling compact discs with karaoke tracks and billing them as genuine Slep-Tone tracks, in the way that a street vendor might hawk knock-off Yves Saint Laurent bags or Rolex watches to passers-by. Whatever wrong the defendants may have committed by making (or causing to be made) unauthorized copies of Slep-Tone’s tracks, they are not alleged to have held out a tangible good sold in the marketplace as a Slep-Tone product. Consequently, the defendants’ alleged conduct is not actionable as trademark infringement."

The nail:

"For all of the reasons we have discussed, we AFFIRM the dismissal of Slep-Tone’s complaint."

They were unsuccessful in suing for format shifting from the start which is why they changed their focus to copyright infringement and received a favorable ruling. It looks like an end has now come to that BS as well. Good news.